Legacy income could decrease by up to 23% this year, which is less than earlier figures had suggested, a legacy consortium has said.
Legacy Foresight updated its five-year projections for legacies and said the impact of the crisis could be less severe than expected.
Its April forecast put the drop in legacy income for 2020 between 8% and 27%. New figures released today project a decrease of between 4% and 23% instead.
A Legacy Foresight survey of 12 charities found that in the first six weeks of lockdown, like-for-like cash legacy income was down by 18%.
Jon Franklin, economist at Legacy Foresight, said: “Although this fall is significant, it’s not as severe as expected, which is heartening news for legacy managers and finance directors.
“We expect the situation to improve over the coming months, as charities continue to adapt their systems for collecting cash and recording bequest numbers in the new environment.”
Legacies ‘sustained many charities through the crisis’
Administrative delays, share and house prices and overall economic outlook could all contribute to the decrease of legacy income.
However, administrative delays in the arrival of bequest notifications “should be fairly limited” according to Legacy Foresight, thanks to charities’ and organisations’ ability to quickly adapt their work to the crisis.
The consortium expects legacy income to pick up next year and grow by between 9% and 13% over the five-year period, from £3.4bn in 2019 to £3.6bn-£3.8bn in 2024.
It also forecasts an increase in deaths of between 25,000 and 35,000 because of coronavirus, which could lead to 1.2%-1.6% more bequests over the same five years.
Franklin said: “As administrative delays unwind and income starts to flow from the anticipated increase in bequests, it’s likely that income could rise quite rapidly during 2021 and 2022.”
Rob Cope, director of Remember A Charity, said: “Voluntary income will often come in peaks and troughs, but this year has been more uncertain than ever. Despite the challenges to estate values, it’s legacy income that has sustained many charities and frontline services throughout the crisis.
“This long-term income stream will become all the more important in the months and years ahead.”
Impact on high net worth individuals
Meanwhile, the current crisis could cause a decrease in the value of legacies left by high-net-worth individuals, according to private client law firm Wilsons.
Wilsons said that previous crashes on the stock market had that effect. For example, the number of estates worth more than £1m that were left to charities went from 3,630 in 2015-16 to 2,328 in 2016-17, following a significant drop in the stock market in 2015.
Cope from Remember A Charity also said that this will have an impact on residual legacies.
He said: “This year, we’ve seen some hefty losses in stocks, shares and property prices, which will almost certainly affect the value of residual legacies, particularly from high-net-worth individuals. After all, we know from The Sunday Times Rich List that Covid-19 cost the UK’s wealthiest people around £54bn in a matter of weeks and it will take some time before the market recovers.
“Although this year’s economic turbulence is more dramatic than most, we need to recognise that estate values will always rise and fall, often due to factors that are far beyond the sector’s control. That’s why it’s so important that we focus on increasing the prevalence of legacy giving, inspiring the giving public and securing income streams that will see charities through the years and decades that follow.”